Thursday, July 5, 2007

An Article Fraught with Possibilities

I've been busy with workshops and other things the past 10 days or so. Even so, I should have caught this article before now. I need to thank my fellow Fed blogger, Bill Testa for bringing it to my attention.

The May 12th issue of The Economist had an outstanding article in its "Economic Focus" piece. Titled To Do with the Price of Fish (article is now premium content); the article can be used to illustrate a number of concepts. The article itself is based on another in the August 2007 issue of the Quarterly Journal of Economics titled "The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector". It is a study on how fishermen in the south of India use cell phones to help them deliver their catch to the best market. While that may not sound intriguing from the description, there is a lot that can be used.

The beach markets for the sardine fishermen often would vary significantly in price; even though they were relatively close. (The article cites 27 buyers over a 15 km - about 9 m - stretch of coast.) Prior to the introduction of cell phones a few years ago, the fishermen would usually take their catch to the nearest point only to find that market oversupplied and prices too low to accept, or buyers not interested. Catches were dumped into the sea when they couldn't be sold. With the advent of cell phones, the portion of fishermen willing to travel to sell jumped from 0% to 35%. Fishermen's profits rose 8%, consumer prices fell 4%.

So which concepts can be tied to this article? In a short time, I thought of ways to connect the story to the following: capital, information and price discovery, law of one price, price, productivity, profit place utility, returns to capital investment, returns to trade, and supply and demand.

There are probably more. What do you see?

Posted by TSchilling at July 5, 2007 12:49 PM

How about how technology increases information and increased the supply curve. In equilibrium, everyone has all the relevant information. Without stretching it too far, you've got them all.

Posted by: mike fladlien at July 5, 2007 9:49 PM

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